Lectures.
Lecture 1.
Transaction costs = all costs incurred in trading a product or service. It has two components:
transportation and all other costs > contact, contract and control. Because of technology,
transportation costs have declined. Many organizations are trying to decline the transaction
costs also. This decline fuels the process of globalization, it is easier to trade between places.
From everything we make, more goes abroad = integration of economies. Globalization did
bring income and wealth, but there are regions that are still left behind.
Upstream = input, everything that goes into the production.
Downstream = the consumer of the production.
Whenever these transactions are high, you want the economy to be concentrated, otherwise
they can be dispersed.
Three actors of globalization: the state multinational corporations and technology. Globalization
is not automatic, but a decision by people and especially the governments + states. Rules and
legislation have an impact on it and so an impact on transaction costs. Low costs stimulate the
economy, so the aim of the World Trade Organization is to increase trade by lowering trade
barriers > change non-tarrif barriers into tariff barriers (taxes) and then lower them.
Two principles on non-discrimination: most favoured nation rule and national treatment rule.
Every country sort of has an agreement with each other.
Conclusion: states are important in setting the rules of the game for trade, they influence
transaction costs.
Lecture 2.
Economics is the study of how economic agents choose to allocate scarce resources. Agents
are for example consumers, workers, firms and governments.
Scarcity = when unlimited desire but limited resources.
Two analyses: positive (what people do) and normative (what people should do).
Another distinction: microeconomics (individuals, firms) and macroeconomics (economy as a
whole, sum of all microeconomics)
Economics based on three key principles:
, 1. Optimization: choosing the best feasible option, given your information and experience.
To optimise consider issues such as trade-offs and opportunity costs (costs of the most
highly valued alternative)
2. Equilibrium: a situation where everyone is optimising, so nobody would benefit from
changes. Where demand meets supply.
3. Empiricism: evidence-based analysis. Then use data to develop and determine.
Market = group of economic agents who are trading a good + the rules and arrangements.
In a perfect competitive market, sellers all sell an identical good, and an individual cannot
influence the price. Buyers/sellers are price takers. However, very few markets are perfect
competitive markets.
To understand the behaviour of buyers u need to know their income and price preferences. You
can decide with consumption bundles (which do they prefer?) and different bundles will provide
the consumer with different levels of happiness > utility = measure of satisfaction that comes
from consuming. It assigns a numerical value to each element of a bundle. The same bundle
can give consumers different levels of utility. Different bundles can give the same consumer
different or equal utility > indifference curve. To identify the affordance of a bundle, prices and
income are required.
A budget set = the set of all possible bundles someone can afford.
The budget constraint = represents the goods that exactly exhausts the entire budget. It
provides information on the opportunity costs and trade-offs. Costs = loss / gain.
When combining preference + budget we can identify the optimal bundle = max possible utility
given the available financial means. The optimal bundle is an equilibrium. At this bundle the
ratio of marginal benefits to price must be identical across goods. If not, consumers could be
happier by shifting consumption toward the good that has higher marginal benefit. An optimizing
buyer makes decisions at the margin.
A change in price affects the constraints. An increase leads to pivot inwards, decrease to pivot
outwards.
A change in income shifts the constraint, an increase leads to a shift to the right and a decrease
a shift to the left. Now you can construct the demand curve.
The willingness to pay is the marginal highest price that a buyer is willing to pay for a good.
Law of Demand states that when price decreases, demand rises.
Aggregating quantity demand means fixing price and adding up quantities everyone demands.
Normal goods: increase income, curve to right.
Inferior goods: increase income, curve to left.
The total benefit is represented by the entire area below the demand curve, split into consumer
surplus and total costs.
Lecture 1.
Transaction costs = all costs incurred in trading a product or service. It has two components:
transportation and all other costs > contact, contract and control. Because of technology,
transportation costs have declined. Many organizations are trying to decline the transaction
costs also. This decline fuels the process of globalization, it is easier to trade between places.
From everything we make, more goes abroad = integration of economies. Globalization did
bring income and wealth, but there are regions that are still left behind.
Upstream = input, everything that goes into the production.
Downstream = the consumer of the production.
Whenever these transactions are high, you want the economy to be concentrated, otherwise
they can be dispersed.
Three actors of globalization: the state multinational corporations and technology. Globalization
is not automatic, but a decision by people and especially the governments + states. Rules and
legislation have an impact on it and so an impact on transaction costs. Low costs stimulate the
economy, so the aim of the World Trade Organization is to increase trade by lowering trade
barriers > change non-tarrif barriers into tariff barriers (taxes) and then lower them.
Two principles on non-discrimination: most favoured nation rule and national treatment rule.
Every country sort of has an agreement with each other.
Conclusion: states are important in setting the rules of the game for trade, they influence
transaction costs.
Lecture 2.
Economics is the study of how economic agents choose to allocate scarce resources. Agents
are for example consumers, workers, firms and governments.
Scarcity = when unlimited desire but limited resources.
Two analyses: positive (what people do) and normative (what people should do).
Another distinction: microeconomics (individuals, firms) and macroeconomics (economy as a
whole, sum of all microeconomics)
Economics based on three key principles:
, 1. Optimization: choosing the best feasible option, given your information and experience.
To optimise consider issues such as trade-offs and opportunity costs (costs of the most
highly valued alternative)
2. Equilibrium: a situation where everyone is optimising, so nobody would benefit from
changes. Where demand meets supply.
3. Empiricism: evidence-based analysis. Then use data to develop and determine.
Market = group of economic agents who are trading a good + the rules and arrangements.
In a perfect competitive market, sellers all sell an identical good, and an individual cannot
influence the price. Buyers/sellers are price takers. However, very few markets are perfect
competitive markets.
To understand the behaviour of buyers u need to know their income and price preferences. You
can decide with consumption bundles (which do they prefer?) and different bundles will provide
the consumer with different levels of happiness > utility = measure of satisfaction that comes
from consuming. It assigns a numerical value to each element of a bundle. The same bundle
can give consumers different levels of utility. Different bundles can give the same consumer
different or equal utility > indifference curve. To identify the affordance of a bundle, prices and
income are required.
A budget set = the set of all possible bundles someone can afford.
The budget constraint = represents the goods that exactly exhausts the entire budget. It
provides information on the opportunity costs and trade-offs. Costs = loss / gain.
When combining preference + budget we can identify the optimal bundle = max possible utility
given the available financial means. The optimal bundle is an equilibrium. At this bundle the
ratio of marginal benefits to price must be identical across goods. If not, consumers could be
happier by shifting consumption toward the good that has higher marginal benefit. An optimizing
buyer makes decisions at the margin.
A change in price affects the constraints. An increase leads to pivot inwards, decrease to pivot
outwards.
A change in income shifts the constraint, an increase leads to a shift to the right and a decrease
a shift to the left. Now you can construct the demand curve.
The willingness to pay is the marginal highest price that a buyer is willing to pay for a good.
Law of Demand states that when price decreases, demand rises.
Aggregating quantity demand means fixing price and adding up quantities everyone demands.
Normal goods: increase income, curve to right.
Inferior goods: increase income, curve to left.
The total benefit is represented by the entire area below the demand curve, split into consumer
surplus and total costs.
